Insights

Supply Chain Plays Key Role in HuHot’s Growth Strategy

The HuHot Mongolian grill concept demands tight specs, proprietary ingredients and brand consistency across regions. A centralized supply chain strategy has been critical to its expansion.

HuHot, a 62-unit Mongolian grill concept with restaurants in 18 states, has been growing its casual dining footprint with 6-8 new locations a year and has recently added a new carry-out option to increase unit sales and patron dining frequency.

A specialized menu, proprietary ingredients, and a high-touch customer experience have been key to the chain’s success. HuHot emphasizes a strategic ratio of franchise holders and company-owned locations; as it has grown it has embraced a strong supply-chain philosophy to manage costs, strengthen vendor relations and maintain brand and ingredient consistency.

Customer engagement a hallmark

Customer engagement has been a hallmark of the HuHot concept since its beginning as an independent restaurant in Missoula, MT in 1999. An environment in which each customer creates his or her own “eatertainment” experience undergirds the concept’s popularity across demographic groups, says HuHot COO Jeff Martin.

That experience begins as patrons individually select a protein, produce, sauce and noodle entreé mix before it is rapidly cooked in front of the customer by chefs “who are encouraged to demonstrate their grill showmanship,” Martin says. Additional meal customization occurs at a custom toppings bar.

In contrast to some Mongolian grill restaurants, HuHot customers never lose sight of their entreé, from the time they select its ingredients to the time they carry it to their table. Martin notes this adds to the experience and is especially important to those who are particular about their ingredient mix or have various dietary concerns.

Ingredient specs are critical

Service is fast. HuHot uses a two-sided food line and up to five cooks at one time to expedite throughput in peak periods. “Name me another full service casual dining concept in which you can walk in, be seated and be enjoying your entreé within five minutes,” Martin adds.

“In one respect, our menu is simpler than you would think,” he observes. “We essentially offer a single entreé at a single, all-you-care-to-eat price. But execution is more complex—nine to twelve protein options, more than 20 produce ingredients, three noodle types, 12 proprietary sauces and a toppings bar. Many of the ingredients come from international sources. Customers also can choose from a full menu of appetizers, soups, desserts and beverages (including alcohol),

“Specifications for grill items are tightly engineered in terms of the cuts they are taken from, the slicing and sizing required,” he adds, noting this ensures they all cook on the grill at the same rate, in 2 to 2-1/2 minutes. That is essential to meeting the chain’s quality and speed-of service standards.

Supply Chain Key to Expansion Strategy

As HuHot expanded into new territories, we “needed to have a rock-solid supply chain” to ensure that new units had reliable regional access to identical ingredients. Martin looked to standardize logistics, procurement and distribution agreements, but first had to convince franchisees that centralizing supply chain operations was in their best interests. Up to then, individual franchise holders had been responsible for their own supply chain arrangements.

“We needed more expertise and leverage in the commodity area and knew it would help us improve our procurement costs” he says. “90 percent of our spend is on protein, proprietary sauces, produce and noodles—that was an important part of our rationale.”

Once franchisors bought in to the strategy, Martin decided the best way to move forward quickly was to use a third-party supply chain service provider. A long-term agreement was signed with SpenDifference, a Denver-based restaurant supply chain service provider offering a portfolio of service options.

That decision helped HuHot improve operating financials while letting it focus corporate resources on growth planning and marketing. For example, HuHot is now rolling out a new carryout program nationally, a strategy that Martin believes should help increase sales and repeat visits at the unit level. SpenDifference helped it source signature packaging supplies as that program evolved.
“Bringing in outside supply chain expertise also helped us improve other things—our RFP process, the strength of our custom contracting, and the speed with which we move new items into the system,” he says. “Also, while SpenDifference handles our purchasing, we still maintain direct, one-on-one relationships with all of our key vendors.”

Looking back at the results of its supply chain decision, “our fiscal and financial results have been positive—with seven figure savings in many of those years—and we successfully navigated some very troubled commodity issues,” Martin says. Commenting on HuHot’s recent decision to again renew the supply chain contract, he says, “I am not the kind of restaurant leader who would ink a third multi-year deal unless the partnership had been successful.”